What Does Fiduciary Mean?
A fiduciary is someone who is legally and ethically bound to act in another person's best interest. In financial services, a fiduciary advisor must put your financial interests ahead of their own. This is the highest standard of care in the advisory industry and provides important protections for clients.
Fiduciary vs. Suitability Standard
Not all financial advisors are fiduciaries. Many operate under a "suitability standard," which only requires them to recommend products that are suitable for your situation—even if better options exist. A fiduciary must recommend the best option for you, not just a suitable one.
Types of Fiduciary Advisors
Registered Investment Advisors (RIAs) are always fiduciaries when providing investment advice. Fee-only advisors are typically fiduciaries. CFP® professionals must act as fiduciaries when providing financial planning services. Broker-dealers and insurance agents generally operate under the suitability standard, though regulations have been tightening.
How to Verify Fiduciary Status
Ask potential advisors directly: "Will you act as a fiduciary at all times?" Review their Form ADV Part 2 disclosure document. Look for fee-only compensation (no commissions). Check if they're a Registered Investment Advisor. Get any fiduciary commitment in writing.